Fact or Fiction: Only lousy investigators get burned (caught) by claimants.Answer: False.

The quarterback sneak is clearly football’s most basic play. Snap the ball. Plow forward. End of story. Right?

Wrong.

In reality, the sneak features a multi-layered plan of attack dependent on a flawless center-quarterback exchange, a significant line surge amidst a world of 350-pound behemoths, and the ball carrier’s ability to remain patient for that critical nanosecond before plunging ahead. If any one of these elements fails, it could mean the difference between winning and losing.

Along those lines, to the casual observer the surveillance business may seem blandly straightforward. Investigator sits in car with camera. Investigator films claimant with said camera. End of story. Right?

Wrong.

Just like the quarterback sneak, a successful surveillance depends on multiple factors, some of which are beyond the investigator’s control.

One of our clients recently called me and asked if we offered drone surveillance. I laughed at first thinking the client was joking, but she was dead serious. She told me that a few surveillance vendors had recently sent her marketing emails touting their drone surveillance cameras. She thought it sounded really cool and was interested in trying one.

I explained to her that a drone is an unmanned aerial vehicle (UAV) typically used by military or law enforcement agencies. Most drones have cameras affixed to them to document the areas over which they’re flying. The military drones are very sophisticated and extremely expensive.

There are also drones for recreational users. These are made of plastic, utilize a handheld remote control, and can be bought at Toys R Us or hobby stores–something fun for a child’s birthday present perhaps, but not designed for surveillance purposes.

I was attending a conference last year where a private investigative company had one of these cheap, plastic drones equipped with a pinhole camera. A young man was demonstrating this drone to a crowd of enthusiastic onlookers when, about 2 minutes into flight, the drone careened into another vendor’s booth and plunged to the ground. Everyone got a good laugh with the exception of the investigative vendor. At the time, I thought this was merely a marketing gimmick gone awry. Surely the investigative industry would not be delving into drone surveillance anytime soon.

Apparently I was wrong. And so are those using these drones.

In application, utilizing “real” drones for non-military or law enforcement purposes is seriously flawed for many reasons. First, as demonstrated by the surveillance company at the aforementioned conference, recreational style drones are cheap and unreliable. Imagine a drone crash-landing onto a claimant’s front yard as he mows his lawn. Or even worse, what if it crashes into the claimant? How quickly can you say, “Invasion of privacy lawsuit?” More on that in a bit.

Second, let’s assume there is a reliable drone that never crashes. In order to be effective and obtain recognizable and useful video, the drone would have to fly relatively low, thereby thwarting any attempt at remaining covert. Seriously, picture walking out your door and seeing a weird plastic flying object hovering 30 feet above your head. Time to reach for your BB gun and shoot that sucker down.

Last, and most important, the adverse legal ramifications of using any type of flying surveillance drones are vast. For example, an individual has a reasonable expectation of privacy if they are on their own property surrounded by an 8-foot wooden privacy fence. Even if the claimant is allegedly bedridden but training for “American Ninja Warrior” in his backyard, the fact that he is enclosed by a wooden privacy fence provides him with a reasonable expectation of privacy. In this situation, an investigator cannot climb a tree and film into the backyard. Such a maneuver is considered an invasion of privacy. For the same reason, an investigator can’t fire up a drone, send it skyward, and start documenting the claimant’s Ninja routine. Again, this would be considered invasion of privacy and most likely result in a very expensive lawsuit against the investigative company and the insurance company.

For case law regarding invasion of privacy lawsuits pertaining to improper investigative activity, please shoot us an email at info@ethosrisk.com

I don’t mean to drone on here (sorry, I couldn’t resist), but what were these firms thinking when touting their drone cameras? Inquiring minds wanted to know, and so did I. Therefore, I conducted some due diligence. I learned that some investigative companies are calling unmanned remote cameras “drones” even though they don’t fly. I suppose the word drone adds a little marketing sizzle, although it borders on false advertising in my book.

Unmanned cameras that run continuous video are, of course, perfectly legal in most instances and most investigative companies have them. Ethos offers a 24/7 camera that runs continuous video 24 hours a day to determine and document a subject’s pattern of activity. The key with these cameras is to ensure they are mounted discreetly either in a vehicle or somewhere outdoors that is not on private property. This camera is an excellent tool in an investigator’s arsenal; however, it should be noted that they are not conducive in every situation. Some areas may be too rural. Other areas may not offer a viable position for the camera to be set up without violating trespassing laws. With that in mind, be wary if you’re working with investigative companies that tell you these unmanned cameras are ideal for all of your cases.

Honestly, they’re not.

In conclusion, conducting investigations is a fundamental part of the fraud fighting process. It’s imperative that all parties involved understand the legal issues involved to avoid any unnecessary and expensive litigation. Also, consumers of investigative services need to separate marketing fluff from the truth.

Moreover, there is not one cookie cutter formula for conducting investigations. Each case is different and requires an individual game plan to maximize results.

That’s all for now. Something is hovering outside my window and I need to grab my BB gun.

I was recently sitting in the O’Hare airport in Chicago when a pre-recorded message came over the speaker system. What sounded like a kind woman stated, “Please remember to cover your mouth when coughing and when sneezing.” I immediately laughed and thought to myself, Are these things that people really need to be reminded of? Are there hordes of humanity strolling around the airport hacking and sneezing on unsuspecting bystanders?

The soothing lady continued, asking everyone “to please wash your hands after going to the bathroom to avoid spreading germs.” Are you kidding me? People actually need to be reminded to wash their hands after using the facilities? I have been to dozens of airports, but this was the first time I ever heard a recording recommending that people do what every kindergartner is taught from day one of school.

As I thought about this, it dawned on me that there must be a reason for these recordings. Then came the light bulb. People–grown adults–are not covering their mouths when coughing or sneezing and not washing their hands after going to the bathroom. I quickly busted out my anti-bacterial gel, washed my hands, and fled from the airport like I was in the movie “Contagion.”

Approximately 15 minutes later, I was taken aback again on my train ride into the city when another recorded voice came over the speaker system. This time it was a male voice, and he sounded much harsher. “Please be mindful of other passengers on the train when talking on your cellular phones.” In other words, “Hey moron, nobody is interested in your phone conversation so crank down the volume a few decibels and use your inside voice.” Well, that was my interpretation.

Folks, I wanted to stand up on the train and proclaim my love for Chicago. The Windy City’s leaders have apparently taken it upon themselves to be everyone’s mom, grandmother, or kindergarten teacher. And quite frankly, I love it.

Our society needs the Common Sense Police, and hey, I could be the chief. Inspired, I started compiling my own list of friendly reminders that could play from loud speakers across the world. I would include the previously mentioned Chicago reminders with an emphasis on not talking loudly on cell phones. Then I’d continue.

Please remember not to be a jerk. Treat other people kindly. Don’t be self-centered. No taking selfies. Remember to wear deodorant. Don’t text and drive. Do unto others as you would have them do unto you. Give back to those less fortunate. Don’t be a bigot or racist. Listen to other people when they are talking to you. Say please and thank you. Don’t use the word hashtag in your conversations.

The train came to an abrupt stop and I snapped back to reality. I realized my list would be way too long and would never fly with the general population. If people aren’t washing their hands after going to the bathroom, how could I expect them to follow my laundry list of reminders? My recording dream died that day on the blue line, but I was satisfied to know that the city of Chicago is doing its part to try and restore civility and basic health standards to our society.

So what does any of this have to do with a blog about fraud, investigation, and risk mitigation? In my opinion, from a very young age we all know the difference between right and wrong. It’s a conscious choice, and deep down inside, most people understand the distinction.

The best advice I ever gave my children is when faced with a difficult decision, just do the right thing. Such a simple concept in theory, but oftentimes very difficult in practice. Surely, we all know that we should cover our mouths when sneezing and hacking. We know we should wash our hands after using the restroom.

Similarly, everyone knows they are not supposed to rob people or steal from companies. Yet annually, insurance fraud still is still an approximately $100 billion industry. Identity theft and other fraud crimes continue to skyrocket. Fraudsters are making a conscious choice to do the wrong thing and most of them clearly understand that.

So fighting fraud becomes a more complex challenge than perhaps we ever thought. Combatting fraud and almost every other negative issue in our society requires fundamentally changing the way people think about doing the right thing.

Simple in concept; most likely impossible in practice.

If I had the answers to this dilemma, clearly I’d win a Noble Peace Prize. There would be no wars, no crime, and no selfies. Just kidding about the selfies. They’ll outlive the cockroaches.

Still, I’d like to try. So how about piping this message through recordings in all the airports and trains? Kindly remember not to steal or defraud. This includes your fellow citizens, corporations, and insurance companies. And please, for the love of God, stop screaming into your cell phones.

When every physical and mental resource is focused, one’s power to solve a problem multiplies tremendously.”

– Norman Vincent Peale

In order to significantly impact fraud, it is essential to formulate a solid, comprehensive approach. After all, you don’t bring a knife to a gun fight. If you’re smart, you bring a bigger gun and maybe a hand grenade. When it comes to fighting fraud, we really need all the weapons we can gather.

I have an approach called the 360-Degree Fraud Program.

Personally, I think it makes sense to attack fraud in three segments:

1) Fraud Prevention – preventing fraud before it even happens.

2) Fraud Detection – identifying fraud in an efficient manner.

3) Fraud Defense – fighting fraud once you have the proper evidence.

These three components are critical to eliminating, or at the least, significantly reducing fraud. Quite frankly, without addressing all three of these areas you are limiting your ability to successfully combat fraud. All three facets of this approach need to be solid in order to come full circle—full circle as in 360 degrees.

As we have already learned, fraud costs the insurance industry billions of dollars each year and it is simply not good enough to combat fraud without taking this three-pronged approach. The adage that you are only as strong as your weakest link certainly applies in this fight. This is how the 360-Degree Fraud Program works:

Phase 1 – Fraud Prevention – Identifying potential fraud before it happens can save insurance companies millions of dollars. Dare I say, with a Dr. Evil voice, “Even billions of dollars.” Industry studies indicate that premium fraud is more prevalent than claimant fraud. Taking this into consideration, it makes sense to start with your underwriting department to ensure that you are writing reliable and cost- effective policies. From a workers compensation standpoint, you should be verifying insured locations, ensuring each insured is utilizing correct employee classification codes, and identifying any potential underreporting of payroll. A thorough due diligence investigation can accomplish all of these things and much more.

From an employer’s or insured’s perspective, conducting thorough pre-employment screenings can significantly reduce fraud, yet many companies including Fortune 500s either don’t conduct such screenings or perform a very cursory search that is not beneficial in weeding out candidates who will ultimately rip them off. For example, the majority of people who engage in fraudulent workers compensation claims are recidivists, people who repeatedly commit the same offenses. Most of these people blatantly lie on their job applications when asked if they have filed prior workers compensation claims. In many states, a workers compensation search can be conducted on an applicant after they have been offered a job. If an employer discovers that the applicant lied on their application, they can rescind the job offer. There is a pretty standard profile of individuals who cheat insurance companies. Employers that are proactive in their hiring practices keep these people out of their workplace, thereby mitigating future risk. It’s like keeping the fox out of the hen house. Everybody except the fox is happy.

Fraud Prevention is often overlooked because of a limited money-centric attitude. Many companies want more business, brokers want more commission, and shareholders want more revenue. Obviously, this is a short-sighted approach that will ultimately end with negative long-term ramifications. As Benjamin Franklin once said, “An ounce of prevention is worth a pound of cure.” Therefore, the best way to eliminate fraud is to avoid planting a corrupt seed. As stated, the first step in combating fraud is fraud prevention. Arguably, it’s the most important.

Phase 2 – Fraud Detection – Detecting fraud in your organization is paramount. And the earlier you detect it, the better. It takes effort and expertise to ferret out suspicious claims. The key is to have a good system in place to identify critical red flags or fraud indicators that typically point to fraudulent claim activity. Having a team of adjusters and claims managers thoroughly trained in fraud detection techniques will significantly improve fraud detection awareness. By identifying fraudulent claims early in the claims process, you save time, money, and aggravation.

Phase 3 – Fraud Defense – Now that you have caught the fraudster red-handed and collected evidence to support your case, it’s time to send a message. The third phase in this approach requires compiling solid evidence-based fraud referrals and submitting them to the respective state fraud reporting agencies. If submitted properly, you will see a dramatic increase in the amount of fraud prosecutions. It’s a great feeling when the system works and people violating said system are punished accordingly.

An added benefit of companies displaying diligence in their pursuit against fraud is that they develop a reputation of taking fraud seriously. They will use whatever measures necessary to combat fraud. Trust me, the unscrupulous claimants who make a living submitting fraudulent claims are well aware of companies that take such an aggressive stance. Conversely, they also know the companies that are timid in the fraud fighting arena. Which companies do you think they target?

Beyond the above-referenced three phrases, it is recommended that you have some mechanism in place alerting you to potential fraud. Many insurance companies utilize predictive modeling software that can assist in identifying suspicious claims. Additionally, a good investigative vendor should provide you with a fraud alert report that will assist in the fraud referral process. Staying on top of these files and communicating effectively with the respective state fraud division is important in receiving a positive outcome. It’s also important to understand what truly constitutes fraud to make sure that you have ample evidence for a legitimate fraud referral.

In closing, having a well-rounded approach when dealing with fraudulent activity is absolutely essential. By attacking fraud from all angles – fraud prevention, fraud detection, and fraud defense – your company will definitely be a force to be reckoned with when it comes to dealing with fraudsters. You will see your fraud referrals/convictions increase exponentially, and even though every case will not be a fraud conviction, you will still be able to utilize critical investigative evidence to settle and close out many suspicious files.

“The truth. It is a beautiful and terrible thing, and must therefore be treated with great caution.” – J.K. Rowling

Thanks to the Internet, there are thousands of informational resources available that if you are so inclined allow you to handle some of your own pre-investigative sleuthing. For example, a simple Google search on your subject may provide invaluable information regarding said subject’s employment status, hobbies, or sports-related activities. Checking someone’s Facebook or other social media sites typically reveals a slew of relevant information. There is a caveat though; you need to make sure you are conducting these investigations in an ethical manner. No false friending claimant’s on his or her social media sites. A good rule of thumb is that if information is available to the general public then it is fair game. If the information is not available to the general public at large and you have to come up with some sort of different way to garner the information than most likely you are stepping on the slippery slope of invading someone’s privacy. At Ethos we have compiled a long laundry list of viable search engines that can provide a plethora of information on the subject you are researching. (For a complete list of useful investigative web sites, feel free to send an email to info@ethosrisk.com) Again we caution you to not push the boundaries, but rather conduct all of your research in a professional and ethical manner. My first boss once told me to do everything in the investigative process with the notion that at some point you will be in front of a judge explaining your actions. Great work advice, and probably great life advice. To reiterate, if you are doing everything in an ethical manner then you have nothing to worry about when searching on the Internet. One final note on this topic, in my opinion it’s always best to let professionals handle things that they are subject matter experts in. It’s certainly reasonable to poke around the Internet here and there on a claimant or maybe even someone you know, but don’t get too carried away. Let the experts do what they do best. I understand that even though you are not a licensed private investigator that you did stay at a Holiday Inn, but that answer may not cut it in a court of law.

So what do you need for such a search? If you have a subject’s date of birth or Social Security number, you could almost write his or her autobiography. In most instances, even a subject’s full name can be enough information to initiate a thorough background investigation. Obviously, the more information you have on your subject, the better chance there is of obtaining relevant background information.

Those being said, proceed with caution.

There are privacy issues involved when retrieving certain types of information. According to the Fair Credit Reporting Act, you cannot conduct a credit check on a subject without their signed consent. Similarly, it is illegal to obtain medical records without a signed release form. There are information brokers out there who imply that banking and investment data is publicly available. It’s not. Such information can only be obtained with a signed consent form from the account holder or with a legal subpoena.

Privacy has to be at the forefront when conducting any database or background investigation. Many states have adopted much stronger penalties for violation of privacy laws. In fact, the individual requesting the information can be prosecuted for ordering the illegally obtained data. As the public becomes more and more concerned with privacy issues, it is imperative that investigators conduct all their actions in a legal and ethical manner. Investigators violating these laws are just providing more fodder for the staunch privacy advocates, thus making it more difficult to obtain legitimate information, which is so beneficial in the investigation of fraudulent claims. Much more on legalities later in this booklet but I think you get the overall message, proceed with caution and err on the side of being conservative.